Purpose
I look at the high frequency weekly indicators because while they can be very noisy, they provide a good nowcast of the economy, and will telegraph the maintenance or change in the economy well before monthly or quarterly data is available. They are also an excellent way to “mark your beliefs to market.” In general, I go in order of long leading indicators, then short leading indicators, then coincident indicators.
A Note on Methodology
Data is presented in a “just the facts, ma’am” format with a minimum of commentary so that bias is minimized.
Where relevant, I include 12-month highs and lows in the data in parentheses to the right. All data taken from St. Louis FRED unless otherwise linked.
A few items (e.g., Financial Conditions indexes, regional Fed indexes, stock prices, the yield curve) have their own metrics based on long-term studies of their behavior.
Where data is seasonally adjusted, generally it is scored positively if it is within the top 1/3 of that range, negative in the bottom 1/3, and neutral in between. Where it is not seasonally adjusted, and there are seasonal issues, waiting for the YoY change to change sign will lag the turning point. Thus I make use of a convention: data is scored neutral if it is less than 1/2 as positive/negative as at its 12-month extreme.
With long leading indicators, which by definition turn at least 12 months before a turning point in the economy as a whole, there is an additional rule: data is automatically negative if, during an expansion, it has not made a new peak in the past year, with the sole exception that it is scored neutral if it is moving in the right direction and is close to making a new high.
For all series where a graph is available, I have provided a link to where the relevant graph can be found.
Recap of monthly reports
June data included slight outright deflation in the CPI, and a small increase in the PPI. Consumer confidence as measured by the U. of Michigan showed a slight decrease as to both present conditions and future expectations.
Long leading indicators
Interest rates and credit spreads
Rates
- BAA corporate bond index 5.78%, down -0.11% w/w (1-yr range: 5.43-6.80)
- 10-year Treasury bonds 4.18%, down -0.10% w/w (3.30-4.93)
- Credit spread 1.60%, down -0.01% w/w (1.36-2.42)
(Graph at Moody’s Seasoned Baa Corporate Bond Yield | FRED | St. Louis Fed )
Yield curve
- 10 year minus 2 year: -0.27%, up +0.06% w/w (-1.07 – -0.17)
- 10 year minus 3 month: -1.16%, down -0.08% w/w (-1.89 – 0.21)
- 2 year minus Fed funds: -0.88%, down -0.15% w/w
(Graph at 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity | FRED | St. Louis Fed )
30-Year conventional mortgage rate (from Mortgage News Daily) (graph at link)
- 6.82%, down -0.21% w/w (6.61-7.79)
With no new highs in interest rates since last October, their rating improved to neutral at the end of February. Recent significant increases reversed sharply in the past month, with the 3 month at and the 2 year near their respective 12 month lows. All of the yield curve measures remain negative. In general the yield curve had been far less steeply inverted than it was late last year.
Housing
Mortgage applications (from the Mortgage Bankers Association)
- Purchase apps up +1% to 148 (125-162) [SA]
- Purchase apps 4 wk avg. unchanged at 148 [SA]
- Purchase apps YoY -13% [NSA]
- Purchase apps YoY 4 wk avg. -12.5% [NSA]
- Refi apps down -2% w/w [SA]
- Refi apps YoY up 28% [SA]
*[SA] = seasonally adjusted, [NSA] = not seasonally adjusted
(Graph at Our Charts )
Real Estate Loans (from the FRB)
- Up less than +0.1% w/w
- Up +2.9% YoY (2.6% – 11.9%)
(Graph at Real Estate Loans, All Commercial Banks | FRED | St. Louis Fed )
Mortgage rates, like bond yields, made multi-decade new highs over eight months ago. Additionally, purchase mortgage applications last made a new long term low at the same time. They have meandered in a relatively tight range since – continuing slightly higher than their bottom last autumn – warranting a neutral rating. Refinancing has traced a similar trajectory, but actually have often turned significantly higher YoY, albeit from nearly non-existent levels one year ago, by enough to warrant a positive rating.
Late last year real estate loans sank below 1/2 of their 12 month high, the last housing indicator to turn negative, and have generally continued to worsen. They paused for several months, but in the last month made renewed YoY lows.
Money supply
The Federal Reserve has discontinued this weekly series. Data is now only released monthly. May data was just released two weeks ago:
- M1 m/m up +0.3%, YoY Real M1 down -6.1% (worst: -14.9% 4/23)(18 month YoY high)
- M2 m/m up +0.4%, YoY Real M2 down -2.6% (worst -9.4% 4/23)(2 year YoY high)
No recession has happened without a YoY real M1 negative, or YoY real M2 below +2.5%. Real M2 fell below that threshold in March 2022. Real M1 also turned negative as of May 2022.
Although both of these are still negative, they are both the “least bad” they have been since early 2022. On an absolute level, the post-pandemic bottom for real M1 was in February; for real M2 it was last October).
Corporate profits (Q1 actual + estimated) from I/B/E/S via FactSet at p. 27)
- Q1 2024 unchanged at 56.49, up +1.7% q/q
- Q2 2024 5% actual + 95% estimated up +0.22 to 59.13, up +4.7% q/q
FactSet estimates earnings, which are replaced by actual earnings as they are reported, and are updated weekly. The “neutral” band is +/-3%. I also average the previous two quarters together, until at least 100 companies have actually reported. This metric went negative with poor Q4 profits, but Q1 profits improved significantly, improving the rating is neutral. The average of Q1 and Q2 is +3.2%, keeping the rating positive.
Credit conditions (from the Chicago Fed) (graph at link)
- Financial Conditions Index down -.03 (looser) to -0.53 (-0.03 – -0.62)
- Adjusted Index (removing background economic conditions) down -0.03 (looser) to -0.48 (+0.16 – -0.59)
- Leverage subindex up +0.03 (less loose) to -0.06 (+1.61 – -0.51)
In these indexes, lower = better for the economy. The Chicago Fed’s Adjusted Index’s real break-even point is roughly -0.25. In the leverage index, a negative number is good, a positive poor. The historical breakeven point has been -0.5 for the unadjusted Index. If this Index goes below -0.60, its rating will change to positive. In the past six months, the leverage index turned neutral and then negative, but has since returned to neutral. The adjusted index had improved beyond its breakeven point, briefly turning positive and then oscillating between neutral and positive. This week it is positive again, while the unadjusted index is in its neutral range.
Short leading indicators
Economic Indicators from the late Jeff Miller’s “Weighing the Week Ahead”
- Miller Score (formerly “C-Score”): up +15 w/w to 226, -3 m/m (154 9/22/23 – 309 on 11/17/23)
- St. Louis Fed Financial Stress Index: down -0.0080 to -0.8206 (-0.3493 10/20/23 – -.9676 5/31/24) St. Louis Fed Financial Stress Index
- BCIp from Georg Vrba: down -8.1 w/w from +58.5 to +50.4 as of 7/4/24 iM’s Business Cycle Index (100 is max value, below 25 is recession signal averaging 20 weeks ahead)
The Miller Score is designed to look 52 weeks ahead for whether or not a recession is possible. Any score over 500 means no recession. This number fell below that threshold at the beginning of August 2021, so not only is it negative, but we are now well into the “recession eligible” time period.
The St. Louis Financial Stress index is one where a negative score is a positive for the economy, and during its limited existence, has risen above zero before a recession by less than one year. It remains very positive.
The BCIp, deteriorated sharply earlier last year below its recession-signaling threshold, but then improved sufficiently so that IM rescinded the recession signal. The signal then activated again for several months, but as of three months ago IM once again stated that their system no longer forecasts a recession.
Trade weighted US$
- Down -0.60 to 123.82 w/w, up +3.7% YoY (last week) (broad) (117.41 – 124.64) (Graph at Nominal Broad U.S. Dollar Index
- Down -0.80 to 104.06 w/w, up +4.2% YoY (major currencies) (graph at link) (99.58 – 107.35)
Early in 2023 both measures of the US$ turned positive. Five months ago, for the first time since then, the US$ as to major currencies turned slightly higher YoY, changing its rating to neutral, and was then joined by the broad measure. Both briefly reverted to positive, but both have since returned to neutral. If either go higher by more than 5% YoY, that will change their rating to negative.
Commodity prices
Bloomberg Commodity Index
- Down -1.75 to 100.75 (95.40 – 108.34)
- Down -3.7% YoY
(Graph at https://www.marketwatch.com/investing/index/bcom?countrycode=xx )
Bloomberg Industrial metals ETF (from Bloomberg) (graph at link)
- 152.09, down -3.10 w/w (132.17 -172.06 )
- Up +3.8% YoY
Both of these measures have improved in the last several months, and industrial commodities surged to new 12 month highs several weeks ago before backing off significantly. Both of these for a few weeks were close to the top of their 12 month ranges, so were positive. The total index retreated to the middle portion of that range several weeks ago, and industrial commodities did so as well this week, so their ratings have changed back to neutral.
Stock prices S&P 500 (from CNBC) (graph at link)
- Up +0.9% to 5615.35 (new all-time high intraweek)
Since we have had multiple new all time highs, but no new lows in the past 3 months, this indicator is positive.
Regional Fed New Orders Indexes
(*indicates report this week) (no reports this week)
- Empire State https://www.newyorkfed.org/survey/empire/empiresurvey_overview.html up +15.5 to -1.0
- Philly up +5.7 to -2.2
- Richmond down -11 to -17
- Kansas City unchanged at -13
- Dallas up +0.9 to -1.3
- Month-over-month rolling average: down -2 to -7
The regional average is more volatile than the ISM manufacturing index, but usually correctly forecasts its month-over-month direction. Since spring 2022, these gradually declined to neutral and then negative. Recently they became “less negative,” but reversed in the last several months. The indexes had shown solid improvement earlier this year, then retreated two months ago, then improved again to close to neutral two months ago, but in the past month faded again. Throughout they have remained negative.
Employment metrics
Initial jobless claims
- 222,000, down -17,000 w/w
- 4-week average 233,500, down -5,250 w/w
(Graph at St. Louis FRED)
Claims remain lower than they were one year ago, continuing to warrant a positive rating, despite an uptrend – that may be the result of residual post-pandemic seasonality – starting eight weeks ago.
Temporary staffing index (from the American Staffing Association) (graph at link)
- Up +1 to 90 w/w
- Down -9.8% YoY (low -12.9%- high -4.8%)
During 2022, the comparisons at first slowly and then more sharply deteriorated, and by early last year had turned negative. After improving somewhat, since last autumn YoY comparisons faded again. It remains frankly recessionary. I suspect this is a secular change and giving a false signal as a result.
Tax Withholding (from the Department of the Treasury) https://fsapps.fiscal.treasury.gov/dts/issues
- $267.5 B for the last 20 reporting days this year vs. $252.2 B one year ago, +$15.3 B or +6.1% YoY
After being negative briefly in late 2022, in January of 2023, these turned back positive, and stayed very positive until November. Since then they have oscillated between being negative and positive for several weeks at a time. Since March they have returned to being positive to very positive, with the sole exception of two weeks. This week they were positive again.
Oil prices and usage (from the E.I.A.)
- Oil down -$1.07 to $82.21 w/w, up +15.3% YoY ($67.12 – $93.68)
- Gas prices up +$.01 to $3.49 w/w, down -$0.06 YoY
- Usage 4-week average up +0.4% YoY
(Graphs at This Week In Petroleum Gasoline Section – U.S. Energy Information Administration (EIA) )
Several months ago oil prices briefly were in the bottom 1/3rd of their 3 year range, and so turned positive. They reversed back and forth repeatedly since then. Six weeks ago they declined enough to change back from neutral to positive, and remained so this week.
Gas prices are closer to the lows of their 3 year range, and so are also positive. With the exception of several weeks in March, until this week, mileage driven had been negative YoY since February.
Note: given this measure’s extreme volatility, I believe the best measure is against their 3 year average.
Bank lending rates
- 5.34 Secured Overnight Financing Rate (SOFR), up +0.01
- 5.44 LIBOR down -0.01 w/w (0.10130- 5.47) (graph at link)
The TED Spread has been discontinued, and LIBOR is in the process of being discontinued. At the suggestion of a reader, I have begun to track the SOFR instead. Unfortunately, SOFR has only been in existence since 2018, so there is no track record has to how it might behave around normal recessions (vs. the pandemic). Over the past 5 years, it does appear to have matched the trend in LIBOR.
But because of its very brief track record, although I will report it I will not be including it in my list of indicators in the conclusion, at least for now.
Coincident indicators
St. Louis FRED Weekly Economic Index
- Up +0.52 to 2.96 w/w (Low 1.07 August 12, 2023 – high 2.96 July 11, 2024) (new 12+ month high)
This measure remained in a neutral range during most of 2023 before breaking above 2.0 last December, changing its rating to positive, and again for several weeks off and on this year, oscillating between neutral and positive. It was recently turned decisively positive.
Restaurant reservations YoY (from Open Table) State of the Restaurant Industry | OpenTable
- 7 day average -3% YoY, vs. +4% one week ago
This index went on hiatus for six weeks, and I discontinued coverage. This week it resumed, but it appears that previous data, which had averaged -3% to -7% YoY earlier this year, has been substantially revised, and now retroactively averages +4% for most of this calendar year. With that very big caution, I have reinstated coverage. This week, for the first time since coverage was reinstated, the rating is negative.
Consumer spending
- Johnson Redbook up +6.3% YoY, 4 week average +5.8% (high 6.0% May 31, 2024; low -0.4% July 13, 2023) United States Redbook Index
The Redbook index briefly turned negative last summer, before rebounding. Comparisons faded somewhat during December, before rebounding again after Christmas, then fading in February, and rebounding again since. It is now at its highest comparison yet in the past year. The link above goes to a 5 year graph to best show the comparison.
Consumer inflation by Truflation (Independent, economic & financial data in real time on-chain)
- Down -0.03 to +1.84% YoY (High 3.34% 9/19/23 – Low 1.84% 7/12/24)(new 12 month low)
This recent addition is a daily update to inflation, similar to the “billion prices project” of the last decade (which required a subscription). I have not added this to my list below of coincident or leading indicators, but needless to say it is an up-to-the-moment reading on this very important indicator.
Real Consumer Spending
- Up +4.5% YoY (12 month high 4.5% 7/12/24; 12 month low -1.4% May 2023) (new 12 month high)
This metric premiered at the beginning of this year. One of my most important mantras is that consumption leads employment. Real retail sales have a long history of doing so, but are only reported on a monthly basis.
The weekly result is derived simply by subtracting YoY inflation as measured by Truflation by the YoY change in nominal consumer spending as measured by Redbook. While it will be somewhat noisy, it should anticipate changes in the monthly measures ahead of time. It backed off from the 12 month high it set in February, and then gradually rebounded, and made a new 12 month high this week.
Transport
Railroads (from the AAR)
- Carloads down -1.2% YoY
- Intermodal units up +7.6% YoY
- Total loads up +3.3% YoY
(Graph at Railfax Report – North American Rail Freight Traffic Carloading Report )
Shipping transport
- Harpex up +17 to 1990 (810– 1990) https://harpex.harperpetersen.com/harpex (new 12 month high)
- Baltic Dry Index down -117 to 1947 (919-3369) (graph at link)
Rail data has been very volatile since early 2023, with lots of volatility from positive to negative and back again. This week it was positive again.
Harpex was as high as nearly 4500 almost 2 years ago, but declined as low as 810 in December of last year before rising almost relentlessly since, setting repeated 12 month highs in the past two months. The usual interpretation for this is that demand is straining against supply, showing a strong global economy, and thus very positive.
Similarly, the BDI was in a generally declining trend throughout 2022 before bottoming at a three year low of 530 in February 2023. The overall trend has been higher since then, rising to a high of 3346 in December, probably reflecting the Houthi attacks on shipping in the Red Sea. This year its low was 1309 in January, and its recent high was 2419 in March. Its current reading is in the middle 1/3rd of its one year range, so is a neutral.
I am wary of reading too much into price indexes like this, since they are heavily influenced by supply (as in, a huge overbuilding of ships in the last decade) as well as demand.
Steel production ( American Iron and Steel Institute)
- Down -1.5% w/w
- Down -0.1% YoY
This metric was negative for most of 2022, then gradually improved in 2023. Several months ago it returned to negative, then rebounded to neutral, then to positive seven weeks ago, before declining to negative again. One month ago it rebounded to neutral; three weeks ago it went back to negative, but rose back to neutral this week.
Summary And Conclusion
Below are this week’s spreadsheets of the long leading, short leading, and coincident readings. Check marks indicate the present reading. If there has been a change this week, the prior reading is marked with an X:
| Long leading Indicators | Positive | Neutral | Negative | |
|---|---|---|---|---|
| Corporate bonds | ✓ | |||
| 10 year Treasury | ✓ | |||
| 10 yr-2 yr Treasury | ✓ | |||
| 10 ry. – 3 mo. Treasury | ✓ | |||
| 2 yr – Fed funds | ✓ | |||
| Mortgage rates | ✓ | |||
| Purchase Mtg. Apps. | ✓ | |||
| Refi Mtg Apps. | ✓ | |||
| Real Estate Loans | ✓ | |||
| Real M1 | ✓ | |||
| Real M2 | ✓ | |||
| Corporate Profits | ✓ | |||
| Adj. Fin. Conditions Index | ✓ | |||
| Leverage Index | ✓ | |||
| Totals: | 3 | 5 | 6 | |
| Short Leading Indicators | Positive | Neutral | Negative | |
|---|---|---|---|---|
| Credit Spread | ✓ | |||
| Miller Score | ✓ | |||
| St. L. Fin. Stress Index | ✓ | |||
| US$ Broad | ✓ | |||
| US$ Major currencies | ✓ | |||
| Total commodities | ✓ | |||
| Industrial commodities | x | ✓ | ||
| Stock prices | ✓ | |||
| Regional Fed New Orders | ✓ | |||
| Initial jobless claims | ✓ | |||
| Temporary staffing | ✓ | |||
| Gas prices | ✓ | |||
| Oil prices | ✓ | |||
| Gas Usage | ✓ | X | ||
| Totals: | 6 | 5 | 3 | |
| Coincident Indicators | Positive | Neutral | Negative | |
|---|---|---|---|---|
| Weekly Econ. Index | ✓ | |||
| Open Table [reinstated] | x | ✓ | ||
| Redbook | ✓ | |||
| Rail | x | ✓ | ||
| Harpex | ✓ | |||
| BDI | ✓ | |||
| Steel | ✓ | X | ||
| Tax Withholding | ✓ | X | ||
| TED (deleted) | ||||
| LIBOR (deleted) | ||||
| Financial Cond. Index | ✓ | |||
| Totals: | 4 | 4 | 1 | |
Among the long leading indicators, the big negatives remain the yield curve and real money supply. The remaining indicators have slowly changed back to either neutral or positive. With the very friendly CPI report this week, the bond market is once again anticipating that the Fed will lower rates, and stocks responded positively to both as well.
Both the short leading indicators and the coincident indicators have generally been improving over the past few months, albeit with some noise. The tone of both the short leading and coincident indicators generally remains positive.
In particular, consumer spending, which has remained very positive in both nominal and inflation-adjusted terms, got even stronger on both counts this week, to new highs, while inflation fell to a new 12 month+ low. Last week I wrote that I would be paying particular attention to the CPI report, and the monthly report also was extremely positive.
SCM Jeans